Banking Reform in Nigeria: The Aftermath of the 2009 Financial Crisis

263 Pages·2015·2.23 MB·English

by  Yomi Makanjuola (auth.)

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Dimitris N. Chorafas
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Banking Reform in Nigeria
The Aftermath of the 2009 Financial Crisis
Yomi Makanjuola
Freelance Business Consultant, Lagos, Nigeria
© Yomi Makanjuola 2015
Softcover reprint of the hardcover 1st edition 2015 978-1-137-49352-1
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ISBN 978-1-349-69705-2 ISBN 978-1-137-49353-8 (eBook)
DOI 10.1007/978-1-137-49353-8
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Library of Congress Cataloging-in-Publication Data
Makanjuola, Yomi, 1958–
Banking reform in Nigeria: the aftermath of the 2009 fi nancial crisis / Yomi Makanjuola.
pages cm.— (Palgrave Macmillan studies in banking and fi nancial institutions)
Summary: “In June 2009, when the Nigerian capital market was in freefall and the banking
sector was close to collapse, Sanusi Lamido Sanusi was appointed as Governor of the
Central Bank of Nigeria (CBN). What followed was a fi ve-year tenure of crisis management.
The sub-prime mortgage crisis in the US and the wider economic and fi nancial crises
experienced world-wide provide a backdrop to this vivid account. In Banking Reform In
Nigeria, Yomi Makanjuola recounts how emerging and less-developed countries like Nigeria
embarked on reforms to rescue their fi nancial systems, achieve fi nancial stability and ward
off economic recession, while the world’s attention was focused on unfolding events in the
US and G-20 economies. The book highlights Nigeria’s experience in the last decade from
the standpoint of the CBN, reviewing events preceding the crisis, the intervention process,
the post-intervention fallout and, lastly, lessons learnt from administered reforms.This!
book provides an in-depth analysis of the fi nancial events that unfolded in Nigeria
throughout the last ten years, and would be an invaluable reference point for academics
in African fi nance and to those with in interest in the African and global banking fi elds.
“— Provided by publisher.
1. Banks and banking—Nigeria. 2. Banks and banking, Central—Nigeria. 3. Financial
crises—Nigeria. 4. Finance—Nigeria. I. Title.
HG3431.A6M35 2015
332.109669—dc23 2015001770
Typeset by MPS Limited, Chennai, India.
In Loving Memory of My Late Father
Cornelius Akindele Olatunbosun Makanjuola
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Contents
List of Tables and Figures viii
Acknowledgments x
List of Acronyms xi
Introduction 1
1 High Stakes Intervention 4
2 Prelude to the Financial Crisis in 2009 23
3 Fallout of Intervention I – Maintaining
Financial Stability 46
4 Fallout of Intervention II – Civil Matters 64
5 Fallout of Intervention III – Criminal Matters 72
6 Ring-fencing Toxic Assets: Establishment of AMCON 87
7 Resolution of Recapitalisation through Bridge Banks 111
8 Case Study: The Union Bank Recapitalisation Process 132
9 Aftermath of Intervention 151
10 Legacies and Lessons Learnt 166
11 Evolution of the Central Bank of Nigeria 182
12 Central Banking in the 21st Century 200
13 Conclusion 217
Epilogue 220
Endnotes 224
Index 235
vii
List of Tables and Figures
Tables
1.1 CBN/NDIC special audit report (1) 11
1.2 Old and new CEOS of troubled banks (1) 16
1.3 CBN/NDIC special audit report (2) 18
1.4 Old and new CEOS of troubled banks (2) 18
3.1 Cross-border banking in the West African monetary zone 54
5.1 Bank CEOs of intervened banks 75
5.2 EFCC corruption cases 76
6.1 Options for asset management 90
6.2 Centralised AMC model 91
6.3 AMCON-IC terms of reference 97
6.4 AMCON recapitalisation and resolution process 99
6.5 Eligible bank assets (EBA) 100
6.6 AMCON executive management team 101
6.7 Procedural steps – recapitalisation of intervened banks 103
6.8 Acquisition of banking sector EBAs 103
6.9 Total amount injected into 5 banks 105
6.10 Key risks facing AMCON 106
6.11 Overview of the M&A process 108
6.12 Transaction Implementation Agreements (TIAs) 109
7.1 Alternatives to bridge bank 113
7.2 Bridge bank legal documentation 119
7.3 Executive management of bridge banks (2011) 124
8.1 Union Bank subsidiaries and associated companies 139
8.2 Summary assessment of what went wrong 140
8.3 Union Bank rescue and reposition strategy 142
8.4 Near-term and long-term strategy 149
viii
List of Tables and Figures ix
9.1 Timeline of major reforms by the CBN 154
10.1 Unified code of corporate governance 174
12.1 Central bank autonomy criteria 204
12.2 Cukierman index criteria 205
Figures
1.1 Nigerian banking sector as at October 2009 7
6.1 Nigerian banks’ non-performing loans (%) 88
6.2 Shareholders’ funds of affected banks 94
7.1 Summary of the bridge bank implementation process 122
8.1 Union Bank interim management team 139
8.2 Rescue and repositioning strategy 141
8.3 Repositioning the bank for growth 141
8.4 UBN rebranding 146
8.5 Position assessment as at June 30, 2012 147
8.6 Union bank half year 2012 performance 148
9.1 Total assets (December 2011) 155
9.2 Deposits (December 2011) 155
9.3 Branch network (December 2011) 156
9.4 Non-performing ratio (December 2009 versus 2011) 156
9.5 Non-performing ratio (December 2009 versus 2011) 157
9.6 Capital adequacy ratio – 1 (Dec 2009 versus Dec 2011) 157
9.7 Capital adequacy ratio – 2 (Dec 2009 versus Dec 2011) 158
9.8 Liquidity ratio – 1 (December 2009 versus 2011) 158
9.9 Liquidity ratio – 2 (December 2009 versus 2011) 159
9.10 NSE All-Share Index (2002–2014) 160